The missing ingredient for middle-class jobs

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Christopher “Topher” Polack began his Apple career as a “creative genius.” He thrived in his job fixing customers’ technology problems and quickly rose through the ranks, getting more on-the-job training along the way. But like most other members of his genius class, he eventually quit. He now works as a freelance consultant specializing in helping older people use technology.

“I wasn’t meant to be a cog,” says Polack, who increased his salary post-Apple.

Polack’s experience provides a blueprint for how to thrive in the modern labor market and points to the future of middle-class jobs. Unlike the industrial revolution, the latest technology revolution diminishes the value of long-term employment relationships and places a premium on individual skills. Workers like Polack are more mobile and take the skills they acquire from one job to the next. Yet America’s institutions haven’t fully adapted, and may be holding the economy back.

Technology — be it Apple software or the steam engine — has always led to changes in how people work. The agricultural revolution fundamentally altered the social and economic relationships that existed for centuries by decreasing demand for farm labor. Before the industrial revolution, small-scale artisans did manufacturing work at home, but then mechanization displaced them. They were replaced by urban factories, which offered steady employment and often terrible working conditions. Eventually employee unions helped introduce better labor conditions, more job stability and generous benefits, which encouraged job tenure.

But retaining employees for many years also made economic sense for employers. As the industrial age evolved, firms increasingly valued employees who understood the routines, machinery and politics of their employer.

As technology has evolved further, so has the relationship between companies and their employees. Instead of firm-specific knowledge, today’s market values individuals’ skills. Being a master of your trade requires working in many different jobs in your career, and depending on your occupation, perhaps in different industries. The modern worker must possess a constantly evolving skill set, a large professional network, and the ability to anticipate future trends and technology. A person can only gain these skills by working at different firms.

The rise of the individual-skill premium has already changed the labor market. Since 1983 the percent of men with more than 10 years of tenure has declined for every age group under 60. Economist Steven Davis observed that before the 2008 recession, when unemployment was low, job loss (though firing or layoffs) had declined and more job changes were voluntary. This suggests people no longer craved long, stable employment relationships. The poor labor market that followed the recession slowed this process. But deeper into the recovery we might expect this trend to continue. Individual-skill premium, in part, explains the rise of the “gig-economy,” where people like Polack apply their skills as independent contractors.

But while the labor market has evolved to reflect the individual-skill premium, institutions have not. Healthcare remains out of sync with the changing nature of the American workforce, since most Americans get health insurance through their employer.

While healthcare reform aims to create a more robust individual market where insurance is more affordable, the new law still relies on employers to provide most insurance, and discourages job changing. If the employer mandate is implemented, employers must offer their full-time employees healthcare. This means every time a person changes jobs, he has to change health plans and potentially doctors. A better solution is to eliminate the tax-exempt status of employer-provided health insurance, and have everyone buy insurance in the individual market.

The government also hurts job mobility by encouraging home ownership. A variety of tax incentives, like mortgage interest tax deduction and waiving capital gains taxes on home sales, encourages Americans to put all their wealth into housing instead of other more liquid assets.

To be sure, home ownership has some economic advantages, but many Americans end up buying houses that are too expensive for them. That makes them less mobile because their portfolios are dominated by an illiquid, levered asset. They have a harder time taking job market risk and lack the liquid funds necessary to relocate. Job changes have the most value early in a person’s career, when it makes more sense to rent than own. Policy could be helpful here by eliminating the tax breaks associated with a person’s first home purchase.

Workers are also often held back by their partner’s job. It’s harder to take a new job and potentially relocate if your spouse works, too. Co-habitation has many economic benefits that outweigh this limitation. But marriage job-lock could be minimized if employers offered more flexible work arrangements and telecommuting.

The odds are in our favor that the latest round of technology innovation, like all others before it, will ultimately improve our jobs and our lives in ways we can’t imagine. The transition period may be painful if outdated economic institutions slow it down. Some institutions that discourage job mobility, like union membership and defined benefit pensions, are already less common, but others remain.

Rather than living in the past, policymakers should embrace the future and amend institutions to encourage the fluid and dynamic labor market America needs.

PHOTOS: Employees help customers buying new Apple iPad Air tablets inside the Apple Store on New York’s fifth avenue, after the new iPad went on sale, November 1, 2013. REUTERS/Mike Segar

Online trader Raymond Firetag works from his home in Sacramento, California in this undated handout photo. REUTERS/Handout

@AllisonSchrager “Polack began his Apple career as a ‘creative genius.’ He thrived in his job fixing customers’ technology problems and quickly rose through the ranks, getting more on-the-job training along the way”

Yes, that is the way things used to work. Companies used to train their employees. Now they are discarded like yesterday’s fish, replaced by new graduates and/or H-1B visa holders from India.

“The modern worker must possess a constantly evolving skill set, a large professional network, and the ability to anticipate future trends and technology. A person can only gain these skills by working at different firms.”

Employers will not hire someone who is missing essential skills; job ads are full of “must have X with Y&Z; must speak BBB and know jargon in CCC.” In other words, you will either learn these skills on your own or be unemployed. You will not learn on the job.

As to the “large professional network,” you will spend all of your free time looking for your next position. Just think how their children will feel growing up, essentially abandoned by their parents.

As for the “ability to anticipate future trends and technology,” welcome to our brave new world. What that means in practice is that you will never plan a long vacation in advance because you will always be afraid of missing your next gig. And if you anticipate the wrong technology, you might find yourself only partially employed, waiting for one of the companies which still use that technology to need a specialist.

And you did not mention that all of these uber-workers must have the personality of a used car salesman to tolerate the abuse they will receive in their careers.

All those sour grapes in your mouth prevent you from tasting the wine of the present or the future. You want heat from the stove before you would put wood in it. Life doesn’t work that way, which you probably already know.

You would be an oyster, anchored to one comfortable spot expecting the ocean to bring everything to you for your enjoyment. Be aware…such spots are few and far between…more “right place, right time” than earned.

Few comfortable spots get sufficient nutrients, and few spots with sufficient nutrients are comfortable. Nobody promised easy.

If companies outsource or use H-1B visas, classify them as foreign corporations and tax the bleep out of them. And the reverse should be true; if you have all American workers, you get a corporate tax rate close to zero.

I want companies where, if employees are disposable, then corporate officers need to be paid solely on performance. For example, the Target CEO should only receive his base pay of perhaps $50,000 next year because he was world-class incompetent. Normal employees are fired for gross incompetence.

But you are retired so your opinion is irrelevant. To slightly paraphrase a Cabinet official from decades ago: you no play-a the game, you no make-a the rules.

Life isn’t fair, never has been, never will be, get used to it. I’ve worked my way up (on salary) as a draftsman, designer, and project manager. I’ve been an entrepreneur/business founder (successful business first time, printing, sold after 12 years, still going a decade later), handling my own books, payroll, purchasing and sales.

I’ve successfully invested in real estate and designed my own home. I’m a prostate survivor (fifteen years out and “clean”) and served as medical advocate/caretaker for a wife with stage four breast cancer survivor (sixteen years out and “clean, quit counting when medical bills exceeded a million dollars).

I’ve also served as estate executor for three people with “complicated” lives. If you’re not brain-dead, you continue to “work” whether you are paid by someone else or not.

“…you are retired so your opinion is irrelevant…”? Those who dismiss real-world experience in what is now history are doomed to repeat mistakes made and lessons not learned. We are all born ignorant, but that’s nothing less than accepting “obtuse” as a philosophy.

All that said, I substantially agree that the ideas you put forth in your second and third paragraphs are worth serious consideration. What America is presently doing (or not doing) is not exactly accomplishing the purpose intended in what is the “new economic normal”.

Okay, Sheepster, I take back what I said about your opinion being irrelevant. When you previously said you were 70+, I assumed you were were looking at life in the rear-view mirror of your La-Z-Boy. I’m not young either.

I’ve seen lay-offs in my time. I’m not saying you deserved to be riffed, but many people who are laid-off are just in the wrong place at the wrong time.

I saw a room-full of people being laid-off around ten years ago: 99% men, 80% over 50 with the other 20% composed of almost all people 40+, no minorities, no LGBTs, etc. A number of the men in the room were project managers, so don’t think that skill prevents your poop from stinking. Others were engineers who worked in an obscure area of expertise; when the company laid them off, their skills were of no value to other companies.

Another lay-off I saw with a different company was composed of 100% men of various ages. This same company brought in Indians by the boatload via H-1B visas; when Americans refused to work until midnight or later (for no more pay), they were riffed.

Sorry, but you were lucky; if you were in the software business, you’d have an entirely different view of things. That’s why I despise the Tea Party because they all think they are geniuses. I despise liberals for entirely different reasons.

“Life isn’t fair”

I really think you have no idea, no idea whatsoever, how H-1B and other visas are abused by employers in the USA. Try searching for “H-1B visa abuse”; stories from the Boston Globe, Businessweek (before Bloomberg bought it), and other sources will be informative.

Solutions to complex problems are seldom simple and usually require some compromise. There are certain things that our government does or does not do that should change, and as one who is able and willing to think about improving that reality some of your comments are worthy of due consideration. Common ground should be always sought, as well as “win-win” solutions (when possible).

I have long said that capitalism is the “engine of prosperity”, but it is much like a V-8 sitting on the concrete. Without fuel, a reliable source of ignition, a throttle and a worthwhile destination, it is without value. “Intelligent employment” is necessary.

I was never “riffed”. In every instance I chose my “bets” for my future considering that which I saw or could find out before making each major decision. There is no reason to question what you see as “abuse” by some employer of the H-1B visa process (and others) in this country, and you’re right…I have no personal experience with this.

I believe it was Hunter S. Thompson who said: “The [software] business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.”

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Allison Schrager is a writer and economist. She worked in finance where she created new, individual pension account investment strategies. She has written for the Economist, Quartz and National Review and has a PhD in economics from Columbia.